How Much Can I Contribute to My SEP IRA? Limits and Deadlines

For 2026, the most you can put into a SEP IRA is the lesser of 25% of compensation or $72,000.¹ If you are self-employed, the effective cap works out to roughly 20% of your net earnings after the required adjustments. Only the employer funds a SEP, so there are no employee deferrals and no age-50 catch-up. The $72,000 dollar figure is an absolute per-person maximum.

The 2026 Limits at a Glance

The annual SEP IRA cap has two moving parts. The 25% share of compensation is fixed by statute. The $72,000 dollar ceiling adjusts each year for inflation.¹ Whichever number is smaller in a given year is your limit.

Compensation itself is capped. For 2026, only the first $360,000 of a participant’s pay counts toward the 25% math.¹ An employee earning $500,000 is treated as earning $360,000 for the calculation. Twenty-five percent of $360,000 is exactly $72,000, which is why the two limits line up at the top.

The limits run per employer. If you have two unrelated employers and each sponsors a SEP, each measures its contribution against its own compensation and dollar cap. A SEP contribution is also not reduced by what a separate employer puts into a SIMPLE IRA for you.² But if your own business sponsors both a SEP and another defined contribution plan such as a 401(k), the contributions for you across those plans share the same overall 25%-of-net-earnings and dollar limits.

How Self-Employed Filers Calculate Their Contribution

If you are a sole proprietor or a partner, your “compensation” is net earnings from self-employment, not gross revenue or gross pay. Before you apply the 25% rate, the IRS requires two subtractions.³

First, take out the deductible half of your self-employment tax, meaning half of the Social Security and Medicare owed on your net profit. Second, take out the SEP contribution itself. That second step is what makes the math circular: the contribution reduces the base it is calculated from. The upshot is that the true ceiling for an owner is closer to 20% of net self-employment earnings rather than the nominal 25%.³

IRS Publication 560 includes a rate table and a step-by-step worksheet that does this for you. Start with your net profit from Schedule C, or your share of income from Schedule K-1 if you are a partner, and follow the worksheet lines. A quick shortcut for the effective rate: divide your target percentage by one plus that percentage. Twenty-five percent divided by 1.25 is 0.20, or 20%.³

Skipping either subtraction is the most common way people overshoot the limit. That mistake carries a real cost, which is covered further down.

If You Have Employees, Your Rate Sets Theirs

The percentage you contribute for yourself is the percentage you owe every eligible employee.⁴ Put 10% of your own compensation into your SEP, and every qualifying employee gets 10% of theirs. You cannot dial your own rate higher or favor certain workers.

An employee is eligible for 2026 if all three of these are true:

They are at least 21.
They have worked for you in at least three of the last five years.
They earned at least $800 from you during the year.¹

The $800 minimum is the 2026 figure, up from $750, and it is periodically adjusted for inflation.⁴ The $360,000 compensation cap applies to each employee’s contribution calculation, not just the owner’s.

Two groups can be left out even if they meet the age, service, and pay tests: union employees whose retirement benefits were the subject of good-faith collective bargaining, and nonresident aliens who received no U.S.-source income from your business.⁵ Everyone else who qualifies has to be covered.

When the Contribution Has to Be Made

SEP contributions have to be deposited by the due date of your federal income tax return, including extensions.⁶ For most sole proprietors and single-member LLCs, that means April 15, or October 15 with an automatic extension. Partnerships and S corporations follow their own filing calendars, so check the deadline that matches your entity.

The long window is one of the plan’s real strengths. You can close your books, calculate your actual net profit, and only then decide what to contribute. You are also not required to fund the plan in any given year, which is useful when income drops.

What Happens If You Contribute Too Much

Any amount above the limit is hit with a 6% excise tax for each year it stays in the account.⁷ You can avoid that tax by withdrawing the excess, along with any earnings attributable to it, by the due date of your individual return including extensions.

When an employer put the excess into an employee’s SEP IRA, the IRS provides two ways to fix it. Under the distribution method, the excess plus earnings comes out of the employee’s account and goes back to the employer, and the employee owes no income tax on the returned amount. Under the Voluntary Correction Program, the excess stays in the account, but the employer submits a filing to the IRS and pays a sanction of at least 10% of the excess. If the excess is under $100, that sanction is waived.⁸ Either way, the deduction for the excess portion is lost. Catching an overcontribution before you file is the cheapest outcome by a wide margin.

1
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living (Notice 2025-67)
2
Internal Revenue Service. How Much Can I Contribute to My Self-Employed SEP Plan if I Participate in My Employer’s SIMPLE IRA Plan
3
Internal Revenue Service. Self-Employed Individuals: Calculating Your Own Retirement Plan Contribution and Deduction
4
Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
5
Internal Revenue Service. SEP Plan Fix-It Guide – Eligible Employees Were Excluded From Participating
6
Internal Revenue Service. Simplified Employee Pension Plan (SEP)
7
Internal Revenue Service. Retirement Topics – IRA Contribution Limits
8
Internal Revenue Service. SEP Plan Fix-It Guide – Contributions to the SEP-IRA Exceeded the Maximum Legal Limits